Saudi Airlines Catering Co.’s net income of SAR 104 million in the first quarter 2019 came below Al Rajhi Capital’s expectations and street estimates of SAR 116 million and SAR 111 million, respectively, the brokerage firm said in an earnings review.
While top-line and gross margins showed healthy improvement, likely driven by solid performance from in-flight catering and reduction in raw material and personnel cost, much of the bottom-line miss happened mainly due to higher than expected impairment on trade receivable under IFRS-9, the report included.
The firm expects growth in revenue to remain moderate till the business cycle picks up. “For the longer-run, we are more optimistic on the growth potential which is driven by rise in passenger traffic and higher commercial flights amid Saudi Airline strategic expansion plans and NTP initiatives encouraging pilgrimage”, the brokerage firm added.
Al Rajhi Capital maintained its “neutral” recommendation on Catering’s stock and cut the target price to SAR 86 per share instead of SAR 89.
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